We entered the fourth quarter of 2019 with U.S. stocks having posted their largest return over the first nine months of the year in the past two decades. Bond returns also have exceeded expectations year-to-date as interest rates have declined.
Investment performance stories draw attention and can be important to building and maintaining financial security. But for most people, trying to negotiate the shifting landscape at the intersection of life and money requires more attention to factors that determine what you get to do with your investments.
Your spending, income, future goals, personal life, family events and many other circumstances will influence your finances more so than whether investment markets are up or down this quarter.
While investment returns progress along an unknown path, your life will change more than you expect. How and where you live, your interests and pastimes, personal and family influences will evolve.
It’s these life transitions and how you prepare for and respond to them that can be more important to your financial success than whether you buy or sell fund A or fund B, hold 60% stocks or 70% stocks, or other strategic investment decisions.
Investment management is always a key piece of the puzzle but often not the most pressing topic to seek answers or advice for. Rather, the following are examples of the big-picture topics that I’m often asked about.
There is no template for the right answers. But asking the right questions likely will lead you to answers that improve the probability of achieving your financial goals.
▪ I’ve lived frugally and been a disciplined saver for years. Now that I’m retired, I’m having a hard time shifting mentality to spending and being OK with it. How much could I spend for how long and still have financial security? How should I invest money that I’m not likely to ever need?
▪ My husband managed our money well for years. He is experiencing cognitive decline. I’ve never been involved in investment decisions. I’m scared. How can I stabilize our finances and understand what we have and what we should be doing going forward?
▪ We’ve had strong stock markets for most of the past decade. I’m newly retired. What happens to my retirement income security if stocks decline swiftly right as I start making consistent withdrawals from my accounts?
▪ I retired but I’m not meant for retirement. I’m an inventive person and life-long learner with more to contribute. How can I manage the transition back to work and what does it mean for my money, taxes and my spouse’s needs for income in retirement?
▪ I sold a business. For years, I put all the earnings beyond my salary back into the business. Now, I have cash that needs to keep working for me. I haven’t invested much outside the tight sphere of knowledge around my business. What should I do?
▪ My parents did well and have financial security, but there is growing evidence that they aren’t able to make good decisions. What do I need to do to help them and be confident that the right things are being done for them and for me and my siblings as heirs?
▪ I want to change my work/life balance and phase into retirement with a new job or by starting a business. What do I need to plan for and think about? What should my time line be for these decisions and, aside from a change in income, how will my long-term finances be impacted?
▪ I own rental property and assumed it would produce much of my retirement income but the property needs more maintenance, the tenants need attention and I’m no longer able to keep up with it all as a landlord. Should I sell the property? Hire a property manager? What are the tax implications? How should I invest the proceeds if I sell the property?
▪ I have the option of taking a lump sum retirement benefit or a pension income stream for the rest of my life. How do I evaluate which is better for my long-term financial security, and for my spouse or heirs?
▪ Shouldn’t I take Social Security now rather than waiting for larger payments later that may not be made if there are cuts to the program?
▪ My IRA required minimum distributions (after age 70½) are larger than I need to supplement my other income. What should I do with this money? Re-invest? Give to charity? Can I do anything to lower taxes on these withdrawals?
More so than, “what is a good investment in today’s market?”, in my experience, it is answers to questions like these that make the most impact on people’s financial lives.